Tuesday, 3 October 2017

Grattan Institute proposes Sydney and Melbourne congestion charge cordons

Across some of the Australian media is the release of a report from the Grattan Institute (a public policy thinktank) report titled "Stuck in traffic? Road congestion in Sydney and Melbourne" (PDF) by Marion Terrill.  It needs a rethink.

It reports what those of us working in the road pricing field would say is, generally speaking, fairly obvious.  Charging for road use at peak times in cities can reduce congestion and is worthwhile.  However, for all of the general merit of the argument, and some useful data in the report, I question very much one of the key conclusions of the report and the value of the report to the public debate about congestion.  In fact, I'd suggest it is counterproductive and sends the case for road pricing backwards in Australia.  It doesn't help that the report doesn't even understand the London scheme properly.

Let me be clear, I am not talking about parking pricing or public transport pricing, all of which have some merits.  Independent regulation of toll road pricing is interesting, but naive.  With private concessions already, there is effectively a contract with private concessionaires about pricing.  Overall the report is lacking in some fairly fundamental analysis, as it provides selected data that indicates on the one hand that most car trips in both cities are not to the CBD.  29% of trips to the CBD are by car in Melbourne, only 15% in Sydney.  81% of trips in greater Melbourne are by car, 67% in Sydney are by car.  Yet its solutions would indicate that this should be the focus.  

My problem with the Grattan Institute report is threefold:
  1. The proposed solution of cordon charging for the CBDs of Melbourne and Sydney;
  2. The lack of any reference to progress on reforms that could eventually lead to road pricing in cities;
  3. The failure to emphasise that the main difficulty with the introduction of congestion pricing is public acceptability.
Why not cordons?

The report briefly mentions London, Stockholm and Singapore cases of congestion charging, but fails to acknowledge that London is an area charge and conditions in central London are now as slow as they were before the congestion charge was introduced in 2003.  Indeed the report completely misconstrues the London congestion charge as follows: 

But the gains in travel speeds are slowly diminishing, due to steadily growing traffic volumes and an inherent limitation of cordon schemes – vehicles that stay inside the zone are not charged, making it free for them to cruise the inner London streets.

The travel speeds are back to where they were before the charge was introduced, in part because road space has been reallocated to pedestrians, cyclists and bus lanes, but also because of uncharged vehicle growth (private hire vehicles - prebooked taxis).  Vehicles that stay in the zone ARE charged because London has an area charge, so they are not free to cruise the inner London streets.  Indeed a key part of the London problem is not that, but that almost half of all vehicles entering central London are either exempt or have a 100% discount from the congestion charge.  The Grattan Institute report ignores this.
None of these examples (and Gothenburg is a much less convincing example) have urban form similar to Sydney or Melbourne.  All have higher densities of population, all have urban commuting patterns more concentrated on their CBDs than the two biggest Australian cities.  In short, the car use patterns in Sydney and Melbourne are much more about people moving between suburbs and within them, than on long trips to the CBDs.  Cordons for Melbourne and Sydney could make a difference to those areas, but the impacts beyond the CBDs are likely to be relatively minor.  

If most car commuting in the major cities is not about going to the CBD, then charging trips to the latter are unlikely to make a big difference to most congestion.  Furthermore, the report dismisses the boundary effects of introducing a cordon charge.  What impact does it have on home or businesses on the "wrong" side having to pay a one off charge for a short trip?  Does it mean a cordon should be ruled out?  No.  However, the idea that this is the right solution is intellectually lazy.  

Much more likely to be effective would be network road pricing, which is what the Grattan Institute says but then doesn't recommend (it thinks that a cordon charge is network road pricing, but it certainly is not).  That means paying to use roads on a network wide basis, varying by time of day and location.  Obviously this would be a much bigger step than a cordon, but I am unsure why other road pricing options are ignored.  Furthermore, although it is acknowledged that such charges could offset registration fees (which seems odd in that it would mean commuters would get an offset of registration fees, but others wouldn't) and that net revenues should be spent on public transport.  Surely if it is offsetting registration fees it should be offsetting spending on roads?  Is there a case for more public transport spending per se or is it assumed?  Surely the idea that revenues should be spent based on merit would make more sense.

This comes to my second point.

What about road reform?

The Grattan Institute appears to be completely unaware of the national Heavy Vehicle Road Reform programme and the proposal in that to create an independent price regulator for existing and future road charges (existing being registration fees and fuel tax).  Heavy Vehicle Road Reform envisages a future whereby all heavy vehicles pay by mass, distance and location.  Furthermore, the Commonwealth government announced some months ago that there would be a study launched into road charging for light vehicles.  The latter, in part due to the challenges in the future as fuel efficiency, hybrid and electric vehicles erode fuel tax revenues.  The Grattan Institute seems oblivious to the likely introduction of an independent price regulator for national heavy vehicle charges, or the possible introduction of full network charges for heavy vehicles at least.   
You see congestion pricing should be seen in a wider context, in that how roads are managed and charged for should be reformed more fundamentally.  That means moving from fixed (registration) charges and fuel taxes to distance, mass, location and time of day charges, set by utility based road providers with an independent price regulator.  Some support for wider reform would have been helpful, but lack of acknowledgement of road reform seems odd.

Public acceptability?

Well this is the key problem, and the media coverage in Australia following the release of the report has almost entirely been negative.  Who believes that charging for road use will reduce congestion?  No one, and it is in part because the Sydney Harbour crossing peak charging has had negligible impacts, but moreso because it hasn't been piloted seriously in Australia.  There is a distinct lack of trust in any government introducing a new charge (it has been coined "traffic tax" in the media, which is disastrous) around what it does with the revenue and if it will reduce other taxes.  
This is why there is a need to talk about road reform more generally, and how congestion pricing can be offset by lower prices offpeak (by replacing registration fees and fuel taxes).  There is a need to bring the public along with how pricing can work, what it would replace and what revenue would be used for.  That requires a lot of effort.  To glibly talk about public acceptability in London (where hardly anyone actually drives to the CBD) or Stockholm (where similarly, most trips are not charged and revenue has been hypothecated for roads) is simply missing the point.  It is overwhelmingly obvious that the reason this policy hasn't gotten anywhere in Australia is because it is politically toxic and that is because it is toxic with the public.

It is that which the Grattan Institute needs to address, which is convincing the public that this would be good for them (and what "this" would look like).  I see little evidence of this, and the public backlash about the report is counterproductive.

What now?

More needs to be done, and it would be helpful to acknowledge that, of all cities, Auckland is more advanced in thinking than any Australian cities, not least because most recent reports indicate a central and local government are in some alignment about the need to act and that pricing is part of the mix.
Australia needs a conversation about pricing roads, which includes congestion pricing, which includes replacing registration and fuel tax, and most importantly discusses what is done with the money, how the roads are managed and paid for.   The Grattan Institute report contains some useful data and analysis, but a report that misconstrues the London scheme, that jumps to transplanting a cordon onto Sydney and Melbourne and ignores the national agenda of road reform falls well short.  My hope is that it doesn't undermine the whole argument by generating public opposition about the concept, by proposing options that are fundamentally flawed.